Investors dump TFG as retailer warns of sharp earnings decline

The Foschini Group (TFG) shares traded as much as 14% lower on Monday morning as a weak trading update for the year ended 31 March rattled investors. Shares traded below the R60 level for the first time since the Covid-19 pandemic lows reached in 2020.

TFG said on Friday after the market closed that while it will deliver sales growth of 7.1% for the full year, headline earnings per share would decline by between 30% and 40% from the 1 015.6 cents reported in FY25. It had previously, in March, warned that profits would decline by more than 20%, but this saw a muted reaction from the market.

The 7.1% growth in turnover looks strong, but this was boosted by the acquisition of White Stuff in the UK, which added R4.5 billion to group sales (totalling R62.4 billion). Excluding this, sales grew by just 2.8%.

Read: Two-pot spending boosts TFG final quarter sales

In its core TFG Africa business, it lost margin during the peak Black Friday and festive season (Q3) and the normalisation of sales momentum and gross margin at the start of calendar 2026 was not enough to offset this.

TFG Africa says earnings before interest and tax (Ebit) in the unit “declined at a mid-teens rate year-on-year”. It says the “weaker trade in the London and Australia segments in the final quarter, and higher interest and IFRS 16 costs further impacted the decline in Heps [headline earnings per share] beyond the group’s underlying operating profit result”.

The softer performance in TFG Africa is actually the highlight of its annual results, with TFG London sales flat when excluding White Stuff and TFG Australia’s sales contracting by 3.4% (in Aussie dollars).

Read:
‘Difficult trading conditions across all regions’ for TFG
TFG sinks as earnings warning spooks market

It will impair the brand values of its Phase Eight business in the UK (acquired in 2015) as well as Tarocash and yd. in Australia (both part of the Retail Apparel Group, bought in 2017).

It says “Phase Eight’s performance has been heavily impacted over several years by the decline in department stores, which accounted for 70% of sales when acquired in 2014, to 45% today”. The group’s repositioning of the brand “will impact profitability in the medium term and will require a partial impairment of the brand’s carrying value in the current period”.

In TFG Australia, the group says the “Tarocash and yd. brands remain profitable, but current weak trading conditions” necessitate the write-down.

It notes that “the Australian business continues to generate Ebitda significantly above the A$43 million recorded when the business was first acquired in FY2018, generating A$94 million in FY2025”.

These (non-cash) impairments total R750 million (equal to around R2.27 a share) and mean that the group’s earnings per share will decline by between 55% and 65%.

Read: Tough half year for The Foschini Group

With today’s move, TFG shares are now down 55% over the past year and are 50% lower than the price they were trading at prior to its first shock trading update for the six months to end-September that was published in October.

This warned of a 20-25% decrease in Heps, with the group eventually reporting a 21.3% decline. That update sent shares down over 16% on the day.